Cedric Stephens | The complicated business of health insurance
Question: This newspaper reported recently that health insurance companies were forcing expectant mothers to incur expenses associated with pregnancy and then submit claims afterwards. This is very unfair. It has always been my understanding that claims made under insurance plans are paid by the provider, less any co-payment, when health cards are presented to doctors, hospitals, pharmacies, or labs. I am trying to get pregnant. My partner and I are covered under his plan. We do not want to be faced with any unpleasant surprises. Can you explain?
- L.M.M., St. Catherine.
Answer: Your question, believe it or not, stimulates my mind. Health insurance is a very taxing subject for the average person to understand. Writing about it is even harder. This is because in addition to knowledge of the 'usual boring insurance stuff,' health plans presuppose some awareness of many medical specialities. As a result, these contracts are very complicated. Few insurance company employees, from my experience, read and understand them. The 'Know your health plan' ads one company is currently running confirm the point. If the policies were drafted with the average person in mind, an ad campaign would be unnecessary. Also, if the customer service staff were familiar with the product, or the byzantine claims process, information and advice could be dispensed 24/7 via a help-desk on demand.
The market for private health insurance, according to a 2011 Financial Services Commission (FSC) study, "has become more and more concentrated to the point of being a duopoly ... one firm controls 65.8 per cent". (A duopoly exists where two companies "own all or nearly all of the market for a given product or service.")
Seven years later, things have remained the same. This is even though a few foreign insurers were granted permission to operate. Overseas companies cater to the top five per cent. Their premiums are out of the reach of 95 per cent of the population. Economic theory, according to the FSC paper, "holds that highly concentrated industries tend to be less competitive ... and producers reap economic power".
Is the shift in how claims relating to pregnancy are paid evidence of economic power or something else?
Firms in the local health segment reported low levels of profit between 2002 and 2011, according to the FSC report. Only twice during the period did net profit margin exceed 10 per cent. Industry data for 2016 show total claims paid of $16.9 billion. Premiums for the same year amounted to $14.1 billion. Claims for maternity benefits totalled $153.2 million. My sense is that these results are driving the changes that are taking place in relation to the payment of claims for maternity benefits.
There are different methods to access benefits under a health plan, according to my research. In some cases, certain services require pre-authorisation. This is a process by which an insured person obtains approval for certain non-emergency medical procedures or treatments prior to the commencement of the proposed medical treatment. It requires the claimant to submit a completed form a minimum number of working days before the scheduled procedure or treatment date. Claims for maternity benefits must be pre-authorised, in one case, 30 days in advance of delivery. Put more simply, health insurance providers appear to be saying that health cards are not to be treated as though they were debit or credit cards.
The procedure for payment also varies. One contract reads: "We may pay the hospital, or Insured Person. For most hospital confinements, we will provide direct payment to the hospital. In such cases, the Insured Person will continue to be responsible for all non-covered expenses including, but not limited to deductible amounts and percentage payable or any amounts more than usual reasonable and customary fees ... If the hospital does not arrange for direct payment, the Insured will be responsible to pay the hospital and submit a claim for reimbursement. We will reimburse the Insured Person."
Planning for babies is complicated stuff. May I suggest that you and your partner sit down over the course of a few evenings and try to understand the nature of the maternity benefits to which you are entitled under your plan. Also, contact the person who administers the plan as well as relative and friends who are familiar with the subject.
- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. Email email@example.com.